More parents helping children buy their first home
The proportion of first-time buyers relying on their parents to help them buy their first home has risen to an all-time high.
According to the latest figures from the Social Mobility Commission published on March 28, 2017, more than a third of first time homebuyers are receiving financial support from their parents, and this is expected to rise to two in five buyers by the 2020s.
The average cost of buying a new house, including the deposit, legal fees, and other costs is £23,000. This is more than many first-time buyers can afford, thus leading to them turning to the so-called ‘Bank of Mum and Dad’. If the parents do not have enough money saved, many are remortgaging their own property or using their property to secure a short-term bridging loan. Though bridging loans are short term, an open bridging loan has no fixed repayment date and there is no penalty for paying off the loan early if financial circumstances improve.
Older parents relying on a pension for their income may find it difficult to remortgage, and could find that a bridging loan is more suitable.
Some parents living in large homes no longer need the space and, by downsizing to a smaller property, can raise money to enable their children to buy their first home.
If a bridging loan can help your children afford their first home, a shrewd step is to consult a broker for advice and access to the best loan deals.